Board tugs at Heartstrings of fans for £2.5m

Vitalijus Vasiliauskas and Sergejus Fedotovas. Picture: Ian Georgeson
Vitalijus Vasiliauskas and Sergejus Fedotovas. Picture: Ian Georgeson
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HEARTS claim selling players and introducing a fans’ membership scheme is needed to generate £2.5 million and help fund the club next season.

Lithuanian director Sergejus Fedotovas told the club’s 
annual general meeting that £1m from player transfers plus £1.5m from membership contributions should provide vital income to meet costs over the next 12 months.

Despite season ticket sales and commercial revenue, Hearts may need to bridge another shortfall of more than £2m just months after a share issue saw fans raise over £1m. Monthly debt repayments to both parent company Ukio Bankas Investment Group (UBIG) and their subsidiary Ukio Bankas, plus tax repayments to Her Majesty’s Revenue and Customs on top of operating costs, mean extra funding will be required.

Fedotovas also admitted that a 15-point penalty from the Scottish Premier League is likely for the start of the new season – unless a takeover is completed before UBIG enter administration. UBIG declared last week that it can no longer meet its financial obligations and the SPL is waiting to see if the insolvency becomes official before deciding whether to punish Hearts with a points deduction and transfer embargo.

That would shatter the club’s recruitment plans. Danny Wilson is close to signing a permanent contract and Scotland internationalists David Goodwillie and Kris Boyd already identified as transfer targets by manager Gary Locke – preparations made with the board’s consent. For the moment, Hearts and their fans are left praying that one of the parties interested in gaining control can do so in the next few weeks.

United Foundation of Hearts, a Scandinavian group and an American consortium have all expressed an interest in UBIG’s 79 per cent shareholding in the Edinburgh club. However, they do not want to shoulder the £25m debt Hearts owe to UBIG and Ukio Bankas. Ironically, the membership scheme Fedotovas revealed to shareholders is similar to how the United Foundation of Hearts wish to run the club should they gain control.

“Around £1  million can be achieved from player sales,” said Fedotovas. “The membership scheme to bring more additional value to supporters is estimated at around £1.5m of additional revenue. The season that has just passed, the club was able to make £2m from player sales and I believe the club has the potential to sell close to a similar amount.

“Looking at our current players, we believe we have talent considerably in excess of what we have provided into calculation. This is not just one income stream. We are budgeting in pessimistic terms. We’re budgeting really careful. We plan for a small level of income, basic 
results and we’ll take it from there.

“We are working to finalise the proposal of membership, which will give additional value to supporters. We plan to launch a programme for our supporters whether they are shareholders or not that will enable them to get more added value and 
become more involved with the club. That is an additional 
revenue stream for the club and that is part of our plans for the business of the club.”

On the implications for Hearts should UBIG be declared bankrupt, Fedotovas said: “UBIG is considering the next steps, whether it should be bankruptcy proceedings or a state of alert. There may be implications for our company. If the parent company goes into bankruptcy there will be a points deduction and we will start next season with minus 15 points. I say ‘if’ that will happen. If there is a change of ownership prior to a UBIG suffering an insolvency event, the club will be unaffected. We are working with potential bidders to try to eliminate potential risk. Ukio Bankas going out of business was not anticipated. It was a surprise.”

Those who invested in last year’s share issue are due to receive certificates soon, although their shares would be rendered worthless if Hearts were forced into administration following the collapse of companies in Lithuania. “We have voted at this meeting to formalise this (new shares) matter. The registrars will produce the share certificates shortly,” said Fedotovas. He later added: “The new shares have exactly the same rights as the ones which existed previously. If the club goes into administration, I believe all shares will disappear, be cancelled. So our prime responsibility is to preserve the current status of the company.”

Hearts’ Lithuanian hierarchy will seek to maximise the value for UBIG’s shareholding in the club during takeover talks. “A bid by a fans’ group (for control) is realistic and can be achieved. But there may be other bidders, and our responsibility is to choose the best possible offer for the company,” said Fedotovas. “It is difficult to say which bidder will be preferred. If the fans’ bid is strong enough, they will take over the club and run it. In no way we are against the fans buying the club. It may be the most secure future.”

The meeting also included a vote against the Hearts chairman Roman Romanov being re-elected to the board. This motion will still pass as UBIG’s majority shareholding allows them an overriding say. With Julija Goncaruk – Roman’s cousin – resigning as a non-executive director recently, Fedotvas was asked about the make-up of the board. “Until this meeting there were three directors: myself, Vitalijus Vasiliauskas and Roman Romanov. We have witnessed the negative reaction to the reappointment of Roman Romanov and obviously this will be passed to him. Hopefully he can give a message to react to that.”

One shareholder responded: “‘Resign’ would be the obvious message from this room.” To which Fedotovas said: “Yes, but he has always taken an interest in the club.”

Goncaruk’s resignation brought up a question on Quantum Holdings, the Swiss firm which owns around 15 per cent of Hearts. Goncaruk was registered as the company’s sole director.

“Ubig controlled 76 to 79 per cent and still owns these shares – 29.9 per cent is secured to Ukio, the rest with Ubig,” said Fedotovas. “Quantum is registered in Switzerland. We’ve been speaking to that company. We never dealt with Julija Goncaruk as a director of Quantum. We have not completed any research or investigation into Quantum.”